01945cas a2200277 a 4500 AALejournalIMF015574 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513500805 1018-5941 BD-DhAAL BD-DhAAL Blanchard, Olivier. Are Capital Inflows Expansionary or Contractionary? : Theory, Policy Implications, and Some Evidence / Olivier Blanchard, Jonathan Ostry, Atish Ghosh, Marcos Chamon. Washington, D.C. : International Monetary Fund, 2015. 1 online resource (24 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students The workhorse open-economy macro model suggests that capital inflows are contractionary because they appreciate the currency and reduce net exports. Emerging market policy makers however believe that inflows lead to credit booms and rising output, and the evidence appears to go their way. To reconcile theory and reality, we extend the set of assets included in the Mundell-Fleming model to include both bonds and non-bonds. At a given policy rate, inflows may decrease the rate on non-bonds, reducing the cost of financial intermediation, potentially offsetting the contractionary impact of appreciation. We explore the implications theoretically and empirically, and find support for the key predictions in the data. Mode of access: Internet Chamon, Marcos. Ghosh, Atish. Ostry, Jonathan. IMF Working Papers; Working Paper ; No. 2015/226 Full text available on IMF http://elibrary.imf.org/view/journals/001/2015/226/001.2015.issue-226-en.xml IMF e-Library